The shortage of successors at small and midsize companies is becoming more serious, with many companies going out of business. The public and private sectors must work together to enhance assistance measures to protect small and midsize firms that support technology and jobs.
In 2020, about 50,000 companies suspended operations, closed or were dissolved, according to a private credit research firm. The record-high figure was up more than 10% from the previous year. Among them, 60% of the companies were in the black.
The credit research firm said that there was a series of closures of small and midsize companies that gave up on business continuity, as the coronavirus pandemic dealt an additional blow to the situation in which they had difficulty finding successors.
It has been estimated that about 2.45 million business proprietors will be over 70 years old by 2025, and about half of them will have no successors.
Small and midsize companies include many small factories with advanced technologies, and service businesses that provide jobs and support local economies. If such healthy companies are forced to close down because they have no successors, the economic loss would be immeasurable.
In the past, it was almost common for family members or employees to take over the operations of small and midsize companies. However, acquisitions by other companies or people who want to start their own businesses are seen as promising ways to overcome the lack of successors.
According to the Economy, Trade and Industry Ministry, there have been 3,000 to 4,000 mergers and acquisitions yearly involving small and midsize companies. Corporate succession is the purpose in some cases.
As the number of companies that act as intermediaries between buyers and sellers is increasing, the ministry has started a registration system for such companies. The ministry aims to make it easier to use the system by giving it the government's "seal of approval." It is hoped that the system will lead to smooth corporate succession while preventing troubles.
It is said that many business owners are reluctant to engage in mergers and acquisitions because it costs a lot of money to assess the assets of target companies and the procedures are difficult to understand.
The government has been involved in matchmaking projects at centers it has established throughout Japan that provide consultation services to support business succession. It needs to strengthen its consultation system and consider expanding subsidies to cover expenses for promoting mergers and acquisitions.
There have already been a number of successful cases. For example, consultations at one of the ministry's centers after the sudden death of the president of an industrial machinery firm with less than 20 employees in Ishikawa Prefecture resulted in the firm's shares being sold to an Ishikawa native who had worked for a major Tokyo-based heavy industry manufacturer. That person became president and jobs at the firm have been protected.
A machinery design firm in Nagasaki Prefecture, which had been struggling to find a successor despite its strong business performance, has come under the umbrella of a company in the same industry with different strengths to complement and expand their businesses.
The role of regional financial institutions is also important. Because they are familiar with the business situation and growth potential of local companies, they must focus their efforts on providing advice and intermediary services related to business succession, not simply provide loans.
-- The original Japanese article appeared in The Yomiuri Shimbun on Sept. 10, 2021.
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